News & Commentary

Board Removes Molina Brothers


Frank Diamond

CEO J. Mario Molina, and his brother, CFO John Molina, were fired by the Molina Healthcare’s board of directors. The announcement, made May 2, cited the company’s disappointing financial performance, according to FierceHealthcare. The Molina brothers are the sons of the company’s founder, C. David Molina.

J. Mario Molina was one of the health insurance industry’s biggest supporters of Obamacare and the company, which focuses on Medicaid managed care, seemed to be doing better under the ACA than competitors.

The 4 million-member company was expected to rake in $16 billion in revenue by the end of 2016. “The thing that surprised us is that we actually exceeded our growth expectations,” J. Mario Molina told The Hill in September 2016.

That was then. In February of this year, Molina Healthcare showed a net loss of $47 million in the fourth quarter of 2016 compared with a $30 million profit in the fourth quarter of 2015.

J. Mario Molina, 58, who assumed the CEO mantle in 1996 after his father’s death, told Kaiser Health News that the reversal was due to what he saw as a structural flaw in the ACA known as risk transfer. It’s one of the subsidies accorded insurance companies who wind up losing money for serving a sicker, poorer population. Except this subsidy doesn’t come from the government directly but from other insurers who don’t have as many sicker, poorer patients.

J. Mario Molina said that he liked the idea but said the formula used to carry it out was flawed. It punished efficiency rather than helped companies that have had some bad luck in the risk pool.

“Let’s put it this way,” he told Kaiser. “Currently, Molina Healthcare is returning 25% of our premiums to the government, which are then distributed to our competitors. So we are really subsidizing our competitors and helping them, rather than forcing them to compete.”